Economy

Modi wants AIIB to expand financing by 10 times in next 2 years

Our Bureau Mumbai | Updated on June 26, 2018 Published on June 26, 2018

The government is firmly committed to the path of fiscal consolidation, Prime Minister Narendra Modi said, adding the government debt as percentage of GDP is consistently declining.

Jiu Liqun, President, AIIB, addressing a press conference at the annual meeting of AIIB in Mumbai on Tuesday.

A key feature of developing Asia’s success to date is aggressive infrastructure investment, says AIIB President

Prime Minister Narendra Modi on Tuesday called on the Asian Infrastructure Investment Bank (AIIB) to expand financing by 10 times in next two years. 

“With a committed capital of $100 billion and huge need for infrastructure in member countries, I take this opportunity to call upon AIIB to expand financing from $4 billion to $40 billion by 2020 and $100 billion by 2025,” Modi said, while addressing the opening ceremony of the third annual meeting of AIIB in Mumbai.

The Prime Minister noted that this would require simpler processing, and faster approval as well as high quality projects and robust project proposals.

“I believe that India and AIIB are both strongly committed to making economic growth more inclusive and sustainable,” Modi added.

 

China-led AIIB had been formed in 2016 with a committed capital of $100 billion, out of which the bank has so far disbursed $4.39 billion. India, the second largest shareholder of AIIB, is also a largest recipient  of AIIB’s funds at the level of $1.4 billion. 

“A key feature of developing Asia’s success to date is aggressive infrastructure investment. The economy cannot grow and people cannot reach their potential without necessary economic infrastructure,” AIIB President Jin Liqun said.

He emphasised that global economic institutions should be revitalised as although the global economic order is precious, it is not imperfect. 

“As developing countries increase their share of the world economy, they should have greater weight in the multilateral institutions,” Jin said.

He added, however, that with greater weight also comes the responsibility. According to Jin, Between 2018 and 2030 Asia’s investment in infrastructure would almost triple - from today’s level to $2 trillion a year.

“This is an enormous challenge,” he said, adding that the required financing would have to come from multiple sources, including domestic and international, public and private sources of capital.

The partnership between international finance agencies is important to make these investments happen, Jin said, adding that “partnership is encoded in the DNA of AIIB”.

Infrastructure investments

Jin also pointed out that the future of infrastructure investments relies on three major principles - sustainability of financing, which means the projects should be bankable, environmental friendliness of the projects being financed and acceptance of people for the project that receive funding. 

AIIB is also looking at new, unconventional models of funding and it is seeking to create capacity and expertise required to speed up infrastructure financing in the member countries.

In his speech, Narendra Modi noted that India has been already applying some of these new models of financing infrastructure development.

“We are applying novel public private partnership models, infrastructure debt funds, and infrastructure investment trusts to fund infrastructure,” he said.

Modi also noted that India is trying to develop brownfield assets as a separate asset class for infrastructure investment.

“Such assets, having passed the stages of land acquisition and environment and forest clearances, are relatively de-risked. Hence, for such assets, institutional investment from pension, insurance and sovereign wealth funds are likely to be more forthcoming,” he said.

The National Investment and Infrastructure Fund that has received a boost with AIIB committing $200 million investment is another effort to expand investments into infrastructure, Modi added.

 

Published on June 26, 2018
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